INDEXED UNIVERSAL LIFE INSURANCE
Indexed universal life insurance products have an interesting combination of features. These policies are permanent and allow you to grow your life insurance funds through the stock market. As with any insurance product, there are benefits and drawbacks you should discuss with your advisor before purchasing a policy.
How does an indexed universal life insurance policy work?
As a permanent insurance policy, it won’t expire at the end of a term – it’s designed to last through your life. It also has a cash value that grows tax-deferred, and you can spend some of that money during your lifetime. Premium payments can be modified, though you need to meet a minimum amount to put enough money into the policy to keep it in force. What sets this policy type apart is its connection to the stock market.
The policy is linked to a market index (like the S&P 500). This means your cash value growth is based on stock market performance. When the market is up, you earn more money. If the market goes down, you won’t earn much, if anything. However, the policy can’t lose money. In the case of a down market, the policy simply won’t grow that year.
Guidance you can trust.
An indexed universal life insurance policy blends insurance coverage and retirement investment planning into one product. It’s not a pure investment, but it be helpful for an investor looking to avoid risk, reap potential growth, and secure permanent insurance coverage.
Potential Benefits Of
Indexed Universal Life Insurance
- Effective combination of retirement plan & life insurance – this type of policy can’t lose money, yet can grow in cash value
- Tax-free growth on investment gains – keep the cash value in the policy and you won’t pay taxes on stock income (ask your advisor for more information)
- Permanent insurance coverage – policy stays in force as long as premiums are paid
Potential Drawbacks Of
Indexed Universal Life Insurance
- Tradeoff for lower risk investing – there may be caps on gains in a good market to offset company losses in a bad market
- Overall cost – in addition to the actual insurance coverage, there are administrative expenses and agent commissions
- Minimum health standards – if you are in poor health, you may not qualify or the policy may be prohibitively expensive (your advisor can direct you to the optimal plan)
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Annuities and life insurance can play an essential role in your retirement portfolio by helping to protect what you’ve earned and ensure it lasts.
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